10 Famous ERP Disasters, Dustups and Disappointments

It's no wonder ERP has such a bad reputation: The recent history surrounding the complex and expensive enterprise software market is packed with tales of vendor mud-slinging, outrageous hype and epic failures.

By Thomas Wailgum

March 24, 2009 — CIO — The world of enterprise applications (ERP, CRM, BI and supply chain apps) may seem boring to those caught up in the hysteria over Twitter and iPhone applications, but there's plenty of drama to be found (even more than on an episode of "The Bachelor"): Troubled multimillion-dollar software deals that produce spectacular failures and huge spending nightmares; vendor marketing bravado that breeds cut-throat competition and contempt; and embarrassing and costly lawsuits over botched implementations and intellectual property breaches.

It's no wonder ERP has such a bad reputation among executives. All of this drama is, in fact, creating a nasty and very real ERP backlash. Consider CIO.com's brief and semi-chronological history of 10 ERP scandals as a warning if you're contemplating an upgrade or implementation.

1. Definitely Not a Sweet Experience for Hershey
Could a failed technology implementation (in this case SAP's R/3 ERP software) take down a Fortune 500 company (in this case Hershey Foods)? Well, it certainly didn't help Hershey's operations during the Halloween season in 1999 or make Wall Street investors thrilled.

In the end, Hershey's ghastly problems with its SAP ERP, Siebel CRM and Manugistics supply chain applicationsprevented it from delivering $100 million worth of Kisses for Halloween that year and caused the stock to dip 8 percent.

So I guess a failed technology project can't actually take down a Fortune 500 company for good, but it can certainly knock it around a bit.

2. Just Do It: Fix Our Supply Chain System!
What did a $400 million upgrade to Nike's supply chain and ERP systems get the world-renowned shoe- and athletic gear-maker? Well, for starters, $100 million in lost sales, a 20 percent stock dip and a collection of class-action lawsuits.

This was all back in 2000, and the horrendous results were due to a bold ERP, supply chain and CRM project that aimed to upgrade the systems into one superstar system. Nike's tale is both of woe and warning.

3. HP's "Perfect Storm" of ERP Problems
The epic tale of HP's centralization of its disparate North American ERP systems onto one SAP system proves thatone can never be too pessimistic when it comes to ERP project management. You see, in 2004, HP's project managers knew all of the things that could go wrong with their ERP rollout. But they just didn't plan for so many of them to happen at once.

The project eventually cost HP $160 million in order backlogs and lost revenue—more than five times the project's estimated cost. Said Gilles Bouchard, then-CIO of HP's global operations: "We had a series of small problems, none of which individually would have been too much to handle. But together they created the perfect storm."

4. A New Type of Freshman Hazing
Pity the college freshman at the University of Massachusetts in fall 2004: The last thing they needed was some computer program to haunt their lives and make their new collegiate experience even more uncertain.

But more than 27,000 students at the University of Massachusetts as well as Stanford and Indiana University wereforced to do battle with buggy portals and ERP applications that left them at best unable to find their classes and at worst unable to collect their financial aid checks. Said one UMass senior at the time: "The freshmen were going crazy because they didn't know where to go." After a couple of tense days and weeks, however, everyone eventually got their checks and class schedules.

5. Waste Management Trashes Its "Fake" ERP Software
Garbage-disposal giant Waste Management is still embroiled in an acrimonious $100 million legal battle with SAP over an 18-month installation of its ERP software. The initial deal began in 2005, but the legal saga commenced in March 2008, when Waste Management filed suit and claimed SAP executives participated in a fraudulent sales scheme that resulted in the massive failure.

Several months later, SAP fired back, claiming that Waste Management allegedly violated its contractual agreement with SAP in several ways, including by "failing to timely and accurately define its business requirements," and not providing "sufficient, knowledgeable, decision-empowered users and managers" to work on the project.

In the fall 2008, accusations were still flying about documentation, depositions and delays in bringing the case before a judge. And that proposed 18-month implementation now sounds like a dream scenario.

6. The Curious Case of Oracle Fusion Applications
Back in January 2006, Oracle boasted that it was halfway through the Fusion Applications development process. You might remember the hype about Fusion Apps: a killer enterprise application suite that combines the best features and functionalities taken from Oracle's expansive E-Business Suite, J.D. Edwards, PeopleSoft and Siebel product lines.

Oracle's master plan was to "build the next-generation of applications that are completely standard." More than three years later, we're all still waiting for the first generation of Oracle's suite of Fusion Apps. Guess what? We'll have to wait some more. How does 2010 sound?

7. Oracle, SAP and a Little Company Named TomorrowNow
If enterprise software maintenance wasn't so boring, the details of this sordid story would make Hollywood producers fight over the rights to shoot this movie. Here's a brief summary: In 2005, SAP bought TomorrowNow (TN), a small company thatprovides ERP software maintenance and services for Oracle's ERP products—at 50 percent off Oracle's prices. Of course, TN's services could work equally as well for SAP's products (but we were supposed to ignore that). We have come to find out that not everyone at SAP thought the TomorrowNow acquisition was a good idea.

Flash forward to 2007: Oracle alleges that SAP (via TN) "has compiled an illegal library of Oracle's copyrighted software code and other materials." A nasty lawsuit unfolded (and is still going strong) and SAP abruptly shut down TN in 2008.

Meanwhile, a former TN cofounder (Seth Ravin) formed his own TN-like company (Rimini Street) and has been scooping up all the former TN business. And, oh by the way, in addition to the Oracle ERP products his company already services, he's going to start offering half-off maintenance services for some of SAP's ERP products this year. (BTW: I've got the script ready if anyone in Hollywood is interested.)

8. Shareholder Pressure Halts SAP ERP Rollout 
All was not well with bedding-maker Select Comfort's multi-module ERP implementation of SAP's ERP, CRM, supply chain and other applications. So in 2008, with serious shareholder pressure to end the $20-million-plus project that was "indicative of extremely poor judgment by management" (charged one shareholder's SEC filing), Select Comfort did just that: It put the project on hold.

In this economic environment, is this just an incidental sign of the times or a sign of more things to come?

9. ERP + SaaS = Software Success or Bad Idea?
When CIO magazine surveyed 400 IT leaders about their ERP systems in early 2008, CIOs said they remained committed to on-premise, traditional ERP systems—despite aggravating integration and high-cost headaches.

The results weren't that surprising. CIOs have been reluctant to take chances storing the sensitive data (accounting, HR, supply chain) contained in their ERP systems in another company's data center. In the survey, just 9 percent of respondents reported using an alternative ERP model, which included SaaS applications.

That was then. This is now: SaaS ERP providers such as NetSuite have experienced greater acceptance of their house-your-ERP-data-offsite models, which in turn has allowed them to go from upstart to industry player.

10. A Legendary "Moon" on the High Seas
The details of the infamous "mooning" between SAP's Hasso Plattner and Oracle's Larry Ellison have become stuff ofurban legend. So what actually did happen? Well, during the 1996 Kenwood Cup sailing race, Ellison's sailing crew reportedly ignored Plattner's wounded sailing yacht (which had a broken mast and bloodied crew member).

Plattner did admit to mooning Ellison's crew ("I lowered my pants," he told Sailing World) for not helping with his injured crew member and battered yacht. But, alas, Ellison was not aboard that yacht. SAP and Oracle haven't stopped battling it out—on land or on water—since.

Other stories by Thomas Wailgum © 2008 CXO Media Inc.